CORPORATE

BANKING
AGENDA

• Introduction to Corporate Banking

• Consortium Finance, Multiple Banking Arrangements and Loan Syndication
• Developments in Corporate Banking
• Q&A
INTRODUCTION TO CORPORATE BANKING

• There are a lot of financial institutions – Small Banks, Banks, Financial Institutions, NBFCs
• Corporate Banking – Aspect of Banking that deals with Corporate Customers
• Corporate Banks are important for companies because these allow companies to manage cash and obtain
loans in order to create value for the economy
• This term was created after Glass-Steagall Act in 1933 to distinguish these banks from Investment Banks
• Investment Bank vs Corporate Bank
• Corporate Bank is more connected with operations of a business while the Investment Bank is connected with
larger-scale strategic decisions

• Corporate Banking is a key profit centre for most banks

CORPORATE BANKING SERVICES

• Small Firms • Large Firms

• Payment Services • Cash Management and Transaction
• Debt Finance Services
• Equity Finance • Credit and other debt Financing
• Private Equity • Commitments and guarantees
• Public Equity • Foreign Exchange and Interest Rate
• Special Financing Services
 CORPORATE BANKING SERVICES

• Four main types of Banking Services are offered to small firms:

• Payment Services
• Generally consists of the same services which are offered to retail customers
• Small firms are provided with business Current Accounts
• Main types of Payments: Cash and Cheque deposit (+writing facility) and electronic transfers
• Debt Finance
• External Source of funds offered by the bank to small companies that raise funds by increasing their debt
• Main sources of external finance for small firms:
• Traditional Bank Loans
• Overdraft Finance
• Additional sources of external finance for small firms:
• Leasing
• Factoring
• Trade Credit
CORPORATE BANKING SERVICES

• Four main types of Banking Services offered to small firms:

• Equity Finance
• External source of funds that allows a company to raise funds by increasing its equity.
• Few small firms access either public or private equity finance
• Private equity consists in an investment in the equity of companies that are not publicly traded on a stock exchange.
• Public equity markets involves the selling of publicly traded common shares or some form of preferred stock or convertible security
to private investors
• Special Financing
• This kind of financing serves to promote the development of small firms in economically deprived areas or ethnic minority firms.
• Auto lending sector for borrowers that don’t have good credit ratings.
• Generally, these loans have higher interest rate than the one offered to borrowers with clean credit ratings because there is a higher
default risk.
CORPORATE BANKING SERVICES FOR LARGE
COMPANIES
• Four Core Products and Services are used by Large Companies:
• Cash Management and Transaction Services
• Reasons of the growth of these services include excess cash balances is an opportunity cost (loos of
interest) and need to know cash position on a real time basis
• Services proposed:
- Controlled disbursement accounts
- Account reconciliation services
- Cheque deposit services
- Electronic sending of letters of credit
- Treasury management software
- Online corporate advisory and risk management services
CORPORATE BANKING SERVICES FOR LARGE
COMPANIES
• Four Core Products and Services are used by Large Companies:
• Credit and other Debt Financing
• Short Term Financing

- Large firms can negotiate credit lines with a certain number of banks
- Large firms are not dependent on one sole supplier of funds
• Long Term Financing

- For large lending requirements, companies can borrow via:

1. Syndicated Loans
2. Issuance of bonds (dent investment for a fixed period of time and fixed interest
rate)
CORPORATE BANKING SERVICES FOR LARGE
COMPANIES
• Four Core Products and Services are used by Large Companies:
• Commitments and Guarantees
• Commitments

- a bank commits to provide services to raise funds to a company at a future date, for
which it receives a fee.
• Guarantees

- in case a bank has underwritten the obligations of a third party.

- Example: Letter of Credit
CORPORATE BANKING SERVICES FOR LARGE
COMPANIES
• Four Core Products and Services are used by Large Companies:
• Foreign Exchange and Interest Rate Services
• Tools offered by the bank to large firms to hedge their:
• Interest Rate Risk
• Foreign Currency Positions
CONCLUSION

• Corporate Banking reflects a bank's strengths in providing

corporate clients a wide array of commercial, transactional and
electronic banking products.

• This can be achieved through innovative product development

and a well-integrated approach to relationship management
WHAT IS A SYNDICATED LOAN?

• Wikipedia: A syndicated loan is one that is provided by a group of lenders and is structured, arranged, and
administered by one or several commercial banks or investment banks known as arrangers (Wikipedia)
• Investopedia: A loan offered by a group of lenders (called a syndicate) who work together to provide funds for a
single borrower. The borrower could be a corporation, a large project, or a sovereignty (such as a government).
The loan may involve fixed amounts, a credit line, or a combination of the two. Interest rates can be fixed for the
term of the loan or floating based on a benchmark rate such as the London Interbank Offered Rate (LIBOR).
• Typically there is a lead bank or underwriter of the loan, known as the "arranger", "agent", or "lead lender". This
lender may be putting up a proportionally bigger share of the loan, or perform duties like dispersing cash flows
amongst the other syndicate members and administrative tasks. Also known as a "syndicated bank facility".
WHY LOAN SYNDICATION?

• When a project is unusually large or complex, it may exceed the capacity of a single
lender.
• For example,
• Amount of loan may be too large
• The risks may be too high
• The collateral may be in different locations
• The uses of capital may require special expertise to understand and manage it

• In these cases, a financial lender may bring other lenders into the deal
HOW LOAN SYNDICATION WORKS?

• Loan syndication involves a large amount of co-ordination and negotiation

• Typically, loan syndications involve a lead financial institution, or syndicate agent, which
organizes and administers the transaction, including repayments, fees, reporting and
compliance, and loan monitoring
• Merchant bankers should have correct assessment of the projects, products, promoters,
project cost and profitability projections based on sales forecasts.
STAGES OF LOAN SYNDICATION
Stage 1
• Pre-Mandate stage initiated by
borrower
• Borrower either liaison with a
single lender, or inviting
competitive bids from multiple
lenders
• Borrower has to mandate the
lead bank
• After the lead lender has been
chosen, they will start the
appraisal process
• Lead bank will see to the needs
of the borrower, will design a
loan structure for the borrower
and develop a credit proposal
Stage 2
• Lender placing the loan and
disbursement
• Lead lender initiates selling
the loan at marketplace, for
which it will prepare an
information memorandum,
term sheet and legal
documentation
• Lead bank will approach other
banks for participation
• Once the loan contract is
finalized, the loan amount is
disbursed
Stage 3
• Post-closure stage
• Involves monitoring through
an escrow account
• Escrow account is nothing but
the account in which the
borrower will deposit the
revenue
• It is the agent’s responsibility
to ensure that the repayment of
loan is top priority and that the
payment is done before
making payments to any other
parties
• It is the job of the agent to
manage the operating and
running of the loan facility on
a regular basis
DEVELOPMENTS IN CORPORATE BANKING

• Two Distinct global trends in corporate finance are emerging:

• Fin Tech
• Digital Currency
FINTECH

• Using technology to disrupt how financial services are delivered is a major area of growth and investment. 
• The barriers to entry are being removed and many new players are entering the market to challenge traditional products and
services.   
• Well-known examples of FinTech include Gpay, PhonePay, Apple Pay, PayPal and Square, but the applications of FinTech extend
far beyond the end consumer. 
• Over the past year,  FinTech innovations that allowed for financial services disruption — including mobile phones, cloud computing
and peer-to-peer networks — have combined with newer technologies, such as blockchain, machine learning and artificial
intelligence such that FinTech has become the focus of both start-up companies and large, existing, technology companies.
• The rise of FinTech is having an impact on how funds are raised in corporate finance, how those funds are traded and what startup
companies have access to in terms of startup capital. 
• The pace of change in this area is also proving to be a challenge for regulators as they try to keep pace with technological
innovation in the industry.
• The good news for startups is that there are now more flexible lending options if they can show that they can compete and disrupt
traditional industries and service models.
DIGITAL CURRENCY

• Digital currency (digital money, electronic money or electronic currency) is any currency, money, or money-like asset
that is primarily managed, stored or exchanged on digital computer systems, especially over the internet.
• Types of digital currencies include cryptocurrency, virtual currency and central bank digital currency.
• Digital currency may be recorded on a distributed database on the internet, a centralized electronic computer database owned
by a company or bank, within digital files or even on a stored-value card.
• Digital currencies exhibit properties similar to traditional currencies, but generally do not have a physical form, unlike
currencies with printed banknotes or minted coins.
• This lack of physical form allows nearly instantaneous transactions over the internet and removes the cost associated with
distributing notes and coins.
• Usually not issued by a governmental body, virtual currencies are not considered a legal tender and they
enable ownership transfer across governmental borders.
• These types of currencies may be used to buy physical goods and services, but may also be restricted to
certain communities such as for use inside an online game.
• Digital money can either be centralized, where there is a central point of control over the money supply (for instance, a bank),
or decentralized, where the control over the money supply is predetermined or agreed upon democratically.
DIGITAL CURRENCY DEVELOPMENT IN INDIA

• Unified Payments Interface (UPI) is an instant real-time payment system developed by National Payments
Corporation of India facilitating inter-bank transactions.
• The interface is regulated by the Reserve Bank of India and works by instantly transferring funds between two
bank accounts on a mobile platform.
• UPI is built over Immediate Payment Service for transferring funds.
• Being a digital payment system it is available 24*7 and across public holidays.
• Unlike traditional mobile wallets, which takes a specified amount of money from user and stores it in its own
accounts, UPI withdraws and deposits funds directly from the bank account whenever a transaction is requested.
• It uses Virtual Payment Address (a unique ID provided by the bank), Account Number with IFS Code, Mobile
Number with MMID (Mobile Money Identifier), Aadhaar Number, or a one-time use Virtual ID.
• A UPI-PIN (UPI Personal Identification number that one creates on the UPI app of the bank) is required to confirm
each payment.
CRYPTOCURRENCY STATUS IN INDIA

• Cryptocurrencies are not illegal in India

• So if you want to buy bitcoins, you can do so and start trading it
• However, India does not have a regulatory framework to govern cryptocurrencies as of now
• The Ministry of Corporate Affairs (MCA) has made it mandatory for companies to disclose crypto trading/investments during the financial year. Experts see it
as a positive step and expect the taxation rules to follow through. This is being considered as the first step towards regulating cryptocurrencies in India.
• The Centre has assured crypto stakeholders that there won't be a blanket ban on digital currencies and that it's still formulating its full opinion on the matter.
Finance minister Nirmala Sitharaman has said the Centre was open to experimentation with new technologies and is not closing its minds for them.
• The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 is yet to be tabled by the government. The Bill seeks to prohibit all private
cryptocurrencies in India, however, “it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses,” the document reads.
• India has levied a 30 per cent tax on crypto investors, and a 1 per cent TDS on every crypto intra-traders. Currently, India has not regulated cryptos but won’t
legalise it as well.
• The country is “fairly ready” with its consultation paper on cryptocurrencies and has consulted domestic as well as institutional stakeholders including the
World Bank and the International Monetary Fund, said Economic Affairs Secretary Ajay Seth.